Airbnb and Hotels: What to Do About the Sharing Economy?

Who knew sharing would one day have its own economy? bengrey/Flickr

The sharing economy seems to be going from strength to strength. The poster child of sharing, Airbnb recently had a valuation of $10 billion and reported revenue of $250 million last year. The company, which allows users to rent out their spare rooms or vacant homes to strangers, overtook 10 million stays on its platform last year and doubled its listings to 550,000 in 192 countries. This has led Fast Company to speculate that Airbnb would “usurp the InterContinental Hotels Group and Hilton Worldwide as the world’s largest hotel chain — without owning a single hotel.”

So just what does a hotel chain do to respond to the threat of the sharing economy? The publically stated sentiment, often appears to suggest that the brand is less of a threat than it may at times feel. Christopher Norton, EVP of global product and operations at the Four Seasons believes that their customers expect a “level of service that is different, more sophisticated, detailed, and skillful”. Richard Solomons, the IHG chief, considers it comes down to a matter of trust and safety. “We’re trusted because we’re highly regulated: If we open a hotel, we have food control, security, a building that is safe; if there is a fire in an Airbnb, you have no idea.”

And yet, the media sentiment around Airbnb continues to grow. Senior hires from their competitors are making them a more serious proposition, becoming a full blown hospitality brand by offering a more comprehensive end-to-end experience for customers. It’s looking increasingly like a gamble for the established brands that business as usual, or even adjusting the fringes of the proposition, will be enough to hold back the sharing economy sentiment.

The sharing economy has cleverly made established brands left dangerously out of touch. If they do attempt to criticise the business model then they can appear like dinosaurs out of step with the hip new economy. And if they start tinkering with the proposition, such as Marriott offering a sharing economy style workspace on demand, then it can appear dangerously close to trying to get down with the kids.

Some have suggested that part of Airbnb’s success lies in the writing background of its Global Head of Community and Mobilization at Airbnb, Douglas Atkin. In 2004 he wrote a book titled ‘The Culting of Brands: Turn Your Customers Into True Believers’. He studied cult brands like Apple, Saturn, Harley-Davidson and jetBlue as well as real cults like the Unification Church and the Hare Krishna movement. The goal was to provide guidance for brands on how cults recruit and maintain members, and generally inspire the same kind of loyalty, devotion and community around their brands. It’s easy to see the same kind of cult like enthusiasm for Airbnb among its users, a kind of evangelism, a sense that they are taking an enlightened path and even helping to change the world.

This is a challenge that conventional marketing techniques will not necessarily succeed against. Because all your activities will easily be interpreted as attempts to deter them from the ‘path of righteousness’. Alex Salmond was very successful in doing this in his campaign for Scottish Independence, skilfully demonizing Westminster politicians as part of the ‘establishment’ making their every move look inept in the context of the new era that is sweeping in. He lost the referendum but by a much smaller margin than had been anticipated.

Cult Therapy

So, what should a brand do? The response needs to be less about the proposition itself and more based around psychology of what is happening. And specifically, given the nature of the marketing strategies that Douglas Atkin appears to promote, it needs to draw the therapeutic literature about ‘cult survivors’. I believe that this forms the basis for brands to start thinking about an appropriate response to the threat of the sharing economy. Given these brands self avowedly use cult tactics then cult therapy seems like a suitable riposte. The core lessons of how to use therapy to help ‘cult survivors’ is generally considered to be in three steps:

Step 1: Encourage the individuals to reassess their experience. People need to be made aware of the marketing mechanics that have been at work. It can be hard for individuals to believe that well-trodden techniques have been used to convince them of the messianic nature of the brands’ claims.

Step 2: The next step is to explore the philosophy of the cult brand to try to bring the attention of the individual to the potential inconsistencies of the brand’s world view. What they considered to be an organisation with lofty ideals and principles may in fact be driven by earthly motivations such as financial returns. Critical faculties of consumers need to be awakened.

Step 3: It is important to explore the ethics of the organisation they were involved with. Are workers’ rights respected? Is there enough of a focus on health and safety, paying taxes and so on. Exactly who is benefiting from the practices of these organisations?

The primary objective of any counselling of cult members is to galvanise the critical mind of the cult victim. This in turn gives back these individuals their ability to think more critically about their choices. Failure to do this will simply mean that all your activities will be seen from the lens of the ‘cult member’ and interpreted accordingly.

Leveraging Underlying Sentiment

More positively, established brands should consider leveraging the opportunities that the sharing economy has exposed:

Communities: Social Identity Theory has long shown that we easily adopt identities which we use to form into groups. This is a key element of the sharing economy – and one which established brands would do well to leverage. Work by my colleague Prof Guy Champniss, demonstrates the way in which we are less about cognitively appraising individuals and more that act based on the behaviour of those around us. Harness this and you have some very powerful momentum to your marketing activities.

Trust: In the past there were significant information asymmetries between consumers and brands meaning consumers needed brands as a marker of trust. Technology has rapidly eroded the need for this and indeed this is the bedrock of the sharing economy. Our fear of strangers has declined as we can see peoples’ identities online – they are no longer a danger to us. As Ben Popper pointed out in his brilliantly titled ‘The decline of serial killers and rise of the sharing economy’, “There is an identity layer that exists now which prevents predators from moving between communities and staying unnoticed as they did in decades past”. We are happier to talk to and engage with strangers. Established brands need to harness this new found sense of trust not least by encouraging online reviews and facilitating greater online engagement between their customer base.

Shared value: There is a desire by users of the sharing economy to share the value in an equitable way between like-minded people. There are many ways in which brands can also engage in this activity – Timpson’s the UK based shoe repairer, for instance, has a programme of recruiting ex-offenders for the stores. They find that there are real benefits for them as an organisation, as well of course for their ex-offenders who typically go on to have long and successful tenure in the company. These programmes are often way more effective than traditional CSR activities.

Play Them at Their Own Game

And one final thought. The sharing economy originally had very strong ethical roots and indeed it still does in many areas. Casserole Club, for example is an organization that links people that like to cook, with others in vulnerable circumstances that would benefit from a hot plate of food. Landshare connects people who want to grow plants with those that have gardens that are too much for them. The list of these grass roots sharing economy organisations often seem to be forgotten in the mainstream media but they are nevertheless flourishing. In a recent survey, we asked, if these schemes had additional sponsorship by businesses, would this make them more or less likely to get involved? Almost half those asked said they would do.

To me, this suggests that there is an opportunity for brands to demonstrate the original intention of the sharing economy. Peer to peer sharing of resources where everyone benefits.

So, in summary, what do you do to counter the threat of the sharing economy? I think there are four key lessons:

Don’t change your business model to become ‘more sharing economy’. It reflects badly on the brand – instead focus on the points of difference that are areas of weakness for sharing economy brands.

Understand the marketing strategies that are being employed by sharing economy brands and then respond in a considered way – taking into consideration the psychology at work.

Tap into the underlying trends that propelled the sharing economy into the mainstream – communities, trust and shared value. How can this work for your organisation?

Explore the opportunity to be part of grass roots peer-to-peer communities that have the aim of supporting communities – show how it can be done.

The sharing economy is an interesting and attractive business model – but it is not the only one in town. Established brands need to promote the virtues of their own business model and really think through in a creative way how to challenge the growing threats of sharing economy brands.